Well, one catagory that I don't think your Ministry of Truth would allow you to investigate is the possibility that illegal copies may generate sales or rentals. There are several catagories of benefits to those who release for free (whether it is inadvertant or not):

If I see someone who is playing a cool game, I might go out and buy a copy because I liked it.

Consider, for example CSS, who gave out a blank CD's with their first release. The additional coverage/publicity was of value. More subtly, the fact that they gave their disc away for free may have undermined the sales of their competitors, so increasing their market share.

Additional, those who do implement DRM may generate so much adverse publicity, that that hurts them. Look at Adobe's reversal once the Skylarov case was publicized, for example.

It baffles me when folks claim that piracy has positive effects. (not necessarily you Mr. E, but others I've seen)

The important question never addressed by notions, that piracy is beneficial, is whether piracy supports long term, sustainable innovation as a system of IPRs does. Implicit in the view that piracy has positive effects is the presumption that static, rather than dynamic efficiency, is good for consumer welfare. Such a myopic view may be tenable only if society is at the end of the road for new, ground-breaking and valuable productions; and the only activity left is to improve upon and make cheaper existing productions.

An important takeaway from Mr. E's remarks is that "tasting" does have positive effects. Yes, when you get a sample of something, it may induce you to go out and get it yourself. However, there is no value in this if if the product is gotten illegally, rather than through legitimate transactions.

Noel,

I am by no means an anarchist or a copyright-hippie. But I think issues of non-compliance are more complicated than they appear at first glance.

The greatest advantage, at least in my opinion, from granting broad IP rights in terms of duration, subject and use is that it allows for the widest possible array of business structures.

But you also risk market failure: how are companies supposed to know how people want to use their works? Price isn't always a good enough signal.

Take "law breaking" associated with Youtube as a hypothetical: it showed industry perhaps the best market structure for making a profit on video on the internet. A structure they very well may support if google is able to follow through with their plans to license content. Think about how brilliant their business structure is: Private-volunteer interface, free-reign over copyrighted content, but with authors still getting paid.

There are unquestionably benefits to law-breaking in copyright; it's just a question of how much leakage we should allow.

My point is simply this: If you are going to make an accurate accounting of the costs of piracy, it should include +'s as well as minuses. Cerainly there is a cost. But IP Central will overstate it..

Anonymous, you raise some good points. I'd be interested to hear your views on fair use. One of the primary justifications of fair use is that it solves various market failures that you mention.

Also, as far as I know, YouTube didn't pull any substantial profit, and now Google must legitimize its business model by ironing out the copyright issues.

As far as the issue of "tasting" helping copyright holders, that can be done legally. DRM schemes can be designed to give users limited access and use to content. Piracy is not the only means of facillitating such activity, and if they are used to justify piracy or other copyright violations, that doesn't bode well for the very people (creators, producers) they are said to benefit.

En, I believe the whole point of Solveig's post is to address your issue.

Noel, I know we keep saying the same things to each other, but it's simply wrong to say that anti-IP folks ignore the dynamic effects. We don't, full stop. Lessig's entire schtick is about *dynamic* losses from IP; what do you think his 'permission culture' line means? Levine and Boldrin, also, are all about dynamic innovation; read their book, I beg you. Stop hitting straw men.

Look, I know the retreat to the dynamic model is necessary because the static position *always* makes you look bad, whereas one can usually invent a sufficiently tweaked dynamic economic model wherein it's *possible* that IP maximalism is just the bestest thing ever ... but it's just dishonest to claim that your opponents 'never address' this. Please.

XT, I've certainly never said *you* ignore dynamic effects. But yes, perhaps I could have stated *rarely* or not *consistently* rather than *never*.

As far as I've read Professor Lessig, I believe he conflates invention and innovation. Simply because something exists, is technically superior, or enables novel uses of information, does not make it an innovation. Professor Lessig would have us bend copyright/patent law, and an essential segment of the IT industry, just so something new need not conform to regulatory policies underwhich all other innovations came about. A good communicator of societal values, a though leader for IT culture; yes, Professor Lessig has his value. As a policy thinker- NO.

I see FOSS as primarily a *process innovation*. FOSS is likely to be flourish only in certain technological spaces, and in comparison to hyrbid (IP mixed w/ OSS) or IP development, FOSS alone may not produce pioneering or groundbreaking innovations (the kind imagined in dynamic models) due to lack of basic R&D.

Re question of positive gains from illicit copying: Yes, this is another thing that could be measured. If one doesn't measure it, it might show up in the revenue model as a wash (say if for 100 illicit copies, 10 lead to sales, both the revenue figure and the copying figure will be slightly inflated). If one illicit copy generates more than one sale, the revenue figure will be more inflated than the copying figure, and at least give the impression that there is less pure piracy relative to legit. sales.

There aren't a lot of content producers betting real money on this model, but there are a few. It's on the very risky side as a strategy, and entertainment producers which already face high risk. Any kind of sampling that allows the producer to track which samples lead to sales and precludes free riding of the total product would be a sounder model. One might describe it as a strategy of last resort--and it is significant that it crops up when there is no effective DRM (and therefore no rental market) or other approach. Bottom line: if the effect were strong enough to be significant to investors, it is doubtful we'd be seeing the decline in interest in developing PC games that we are in fact seeing. But it is all an ongoing experiment.

For some sectors where the goods are in the vast majority of cases consumed only once (movies) the effect would be negligible. For music it might be larger, since the good is often consumed more than once. But it is probably very small for hits (they'll already have been "sampled" some other way such as through radio play).

Re the "Ministry of Truth" remark and the accusation of distortion: It may be a mistake for me to even notice this kind of insinuation, but I am going to respond just this once. You have now sent us several messages complaining about this or that perceived slight, and having it turn out that the problem was simply that you failed to understand some feature of the interface such as spam control.

This should put you on notice that your sense of our motives and methods is grossly distorted. Consider, in addition the data point that you are talking about people who work for a freakin' think tank, giving up the *much* higher salaries that could have been earned as representatives of client interests in law firms or as consultants. The ability of lawyers or consultant's to take on their client's interests, subsuming their own, and follow instructions is special and compensated as such. This is not what think tanks do; we address the public interest. In my case, I'm too fond of my own opinion to function otherwise. I'm delighted and grateful that we have donors whose interest in these issues often parallels our own. But if you think that this is going to point you to a weakness in my line of argument or methods, think again. It would be just plain stupid for me to put forward facts or arguments in the context of a controversial argument that any reasonably informed person could poke holes in. I might from time to time make a mistake, but a distortion it ain't.

Solveig, you seem to be suggesting that there are rental markets in certain types of works only where, and because, there are relatively secure DRM systems for such works:
... someone who ... acquired an illicit copy might very well have rented a copy. This consideration affects products for which relatively secure DRM has enabled a rental market (console games, movies) but not music or computer software.

You make a similar suggestion in the post above (that "when there is no effective DRM ... therefore no rental market") and I seem to recall your making this argument more explicitly in the past.

I know it's not the central theme of your post (and I agree that measuring the effects of piracy is complex, as you point out) but this assertion is not well supported. There can be a thriving rental market even in the absence of "relatively secure DRM." Two examples that come to mind are public libraries (which often lend or rent music, movies, and software in addition to books) and pre-DVD video rental stores. Much shareware software (including very successful titles) is also sold through something quite similar to a "rental" model. The reason one doesn't see Blockbuster (or Netflix, or your local rental shop)offering music CD or computer software rentals isn't because these items lack DRM (and in fact, in many cases, these items *do* have DRM), nor because consumers don't want it, nor even, necessarily, that most creators of such works don't want it, but rather, because US copyright law makes it illegal to distribute sound recordings or computer software through rental, lease, or lending. See 17 U.S.C. Sec. 109(b)(1)(A). It is this special treatment of these two classes of works -- essentially, a special limitation on the first sale doctrine -- that has led to such a marked difference in how rental models are implemented for music, movies, software, and console videogames.

That's a good point, the DRM/rental connection isn't self-evident. It's most evident with games and most complicated with software, where the market is all over the place. Let me sketch in some details.

Sec. 109(b)(1)(A) doesn't take the form it does arbitrarily. If it didn't seem as if rental would be a unmitigated font of illicit copies for those sectors of the market, there would be little interest in such a provision. It creates something of a chicken-or-egg problem; it's possible that illegality of rentals for these things reduces interest in thinking about effective DRM for them, or some other way to enforce copyright.

Public libraries I don't count as a market phenomena. As I understand it, their rental activities have indeed been something of a problem, but limited by various factors such as no Internet distribution.

Pre-Internet and pre-digital, the copy protection/rental link is harder to see. Other factors come in. For pre-DVD movies, it was hard to obtain dual-deck VCR's except for professional use. There certainly was a lot of copying of cassette tapes going around between friends, but the whole casual piracy enterprise was still pretty cumbersome.

"Re the "Ministry of Truth" remark and the accusation of distortion: It may be a mistake for me to even notice this kind of insinuation, but I am going to respond just this once. "

Solveig:

Suffer just a little bit of humor, please.

And the point being that your funding distorts your conclusions is not really out of line, any reasonable person would believe that think tanks reflect the interests of their funders.

Just look at all the global Warming deniers, funded by--Gas Companies, surprise surprise..

Oh, was I supposed to find that funny? Why? It wasn't. Frankly I think that you owe us an apology.

The only global warming skeptics I know of are at Cato and CEI, and motivated are squarely by ideology; it wouldn't matter who their donors were. Your line of thinking is particularly silly in the case of Cato, which gets little money from corporations and which has a reputation for being willing to take big losses rather than respond to donors who pressure them to change policy. While I don't think that the free-market movement has handled environmental issues well, it isn't due to any sort of conspiracy. Again, there is a difference in having some interests in common or running in parallel with a donor, and serving as their representative. Many, many industries donate massive amounts of money to environmental groups, the Red Cross, and other organizations without converting these organizations into some sort of covert operation.

In my ten years of think tank life, I have occasionally heard of situations where think tanks put securing a particular donor ahead of their policy inclinations. It cannot be kept quiet for long. It causes serious personnel and reputation trouble for the think tank. It is, in short, very rare.

Hi Solvieig
The Gowers review has some interesting insights on the effects of piracy in its chapter 4, mainly ragarding music and books. But the message is that older music and books are not selling. A new book fx is generating all its revenue in the first 20-24 months.
So piracy effect calculations should probably not be done by numbers only but by what is copied as well....That said most pirated cd´s or MP3´s are probably prette new artists and music.

Noel, you're probably tired of talking about this but I'll respond anyway :).

*Anonymous, you raise some good points. I'd be interested to hear your views on fair use. One of the primary justifications of fair use is that it solves various market failures that you mention.*

It seems to me that when people (or at least Wendy Gordon) talk about fair-use it is within the context of trying to solve market failure caused by transaction costs. I think in our internet age these situations are becoming increasingly rare -- everythings so much easier (and cheaper) with advances in technology.

What I'm talking about is a different market failure: the failure of companies to be able to tell how they should best enforce their copyright. Authors have shown historically that they are slow and lack creativity when creating market structures to sell their works.

*Also, as far as I know, YouTube didn't pull any substantial profit, and now Google must legitimize its business model by ironing out the copyright issues.*

You're misreading Youtube's business structure. They weren't trying to make money by turning a profit, but by increasing the value of their business -- like a professional sports franchise. Youtube ended up selling a thirty-five person company for 1.6 billion dollars. That's an astronomical profit.

And now that Youtube has built an entirely unique volunteer/advertising based structure, if Google can iron out the licenses, users and authors will benefit.

It's a structure that would have bever been invented if there wasn't a sizeable number of people who broke the law.

"The only global warming skeptics I know of are at Cato and CEI, and motivated are squarely by ideology; "

Well, that's the whole problem, as Global Warming is an issue first and foremost related to SCIENCE not IDEOLOGY.

See enigma_foundry's response over at TLF, as Solveig won't allow my response to be posted here...

Huh? I have no objection to your response being posted here, so long as there is no potty language. Paranoia again! But I have recovered my temper, and you may rant away and welcome.

Cheers,
SS